Square Yards raises Rs 112 Cr for Hyderabad property under fractional ownership
- ByStartupStory | March 6, 2023
Square Yards, a company primarily engaged in property and loans brokerage, has announced the offering of its first fractional ownership property to investors. In a statement released on Sunday, PropsAMC, the asset management services and data intelligence division of Square Yards, revealed that it has secured INR 112 crore for its first Grade A commercial project in Hyderabad.
Square Yards, a proptech firm that has recently expanded into assisting investors in fractional ownership of commercial properties, has successfully raised INR 112 crore from high net-worth individuals for the acquisition of more than 100,000 square feet of office space in Hyderabad.
Square Yards’ latest project marks the company’s first foray into the fractional product category, with a group of more than 250 investors making average investments of INR 40 lakh. Founder and CEO Tanuj Shori stated that the milestone of surpassing INR 100 crore in assets under management is evidence of investors’ unwavering trust in the company’s platform. The primary objective of the project is to assist investors in generating substantial returns through rental income and property value appreciation.
Square Yards‘ CEO Tanuj Shori has outlined the company’s ambitious target of achieving INR 1,000 crore in assets under management over the next six months by acquiring a diverse portfolio of assets throughout tier-I cities, with a particular focus on properties offering superior periodic yields and exit returns. The Hyderabad-based commercial property represents the firm’s inaugural venture into the fractional product category and offers investors 8 per cent gross returns on their investment, along with a targeted extended internal rate of returns (XIRR) of 14-15 per cent after fees and before taxes.
Fractional ownership involves creating a private limited company, known as a special purpose vehicle (SPV), to acquire properties, with investors receiving a proportional stakeholding in the SPV. As a facilitator, Square Yards will list these assets on its platform and gather funds from high net-worth individuals for the property acquisition. The company will serve as the asset manager for both the investors and the property, and the tenant will pay rent to the SPV every month, with proportional distribution to all investors.
As the commercial real estate sector undergoes digital transformation, fractional ownership is gaining popularity as an investment option. According to Anand Moorthy, CBO of Asset Management Services and Data Intelligence at Square Yards, there are currently 4-5 players in the fractional ownership market in India with a combined asset under management of around Rs 1,200 crore.
Major players in the domain include Myre Capital, Strata, hBits, and Propcatalyst. Moorthy added that fractional offerings could extend beyond commercial assets and include industrial assets, schools, student housing, hospitals, and land in the near future.
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